Bank of England Makes First Interest Rate Cut in 4 Years Amid Inflation Concerns and Economic Uncertainty
The Bank of England Lowers Interest Rates to 5% as Inflation Pressures Persist and Economic Growth Faces Uncertainty
The Bank of England (BoE) made its first interest rate cut in over four years, reducing the base rate from 5.25% to 5.0%.
This marked a shift after a prolonged period of rate hikes, with rates held at a 16-year high since August 2023.
The decision was taken to support the economy amid mixed signals: inflation had briefly hit the BoE's 2% target but was expected to rise again due to increasing energy prices, and wage growth remained elevated.
The Monetary Policy Committee (MPC) was split, with five members voting for the cut and four preferring no change, reflecting the delicate balance between inflation control and economic growth.
Despite the rate cut, the BoE emphasized that monetary policy remains restrictive to manage lingering inflation risks.
The MPC pointed out that inflationary pressures, particularly from services and wages, have been more persistent than expected. Governor Andrew Bailey cautioned that further cuts should not be rushed to ensure inflation is properly contained.
The market anticipates further cuts later in 2024, but the BoE's decisions will remain data-dependent, considering both inflation trends and economic performance.